Examkin

Soru

Zorluk: Çok zorMarket Participants and Investor Classifications

A commercial bank holding 150millionintotalassetsmanages150 million in total assets manages 85 million in securities portfolios for its discretionary institutional accounts. The bank attempts to purchase unregistered debt securities offered under Rule 144A from a registered broker-dealer. The broker-dealer executes the order by selling the debt securities directly to the bank from its own proprietary firm inventory. Which of the following correctly identifies the qualification status of the bank under Rule 144A and the capacity in which the broker-dealer is acting?

  1. The bank does not qualify as a Qualified Institutional Buyer (QIB) because it owns/invests less than $100 million in eligible securities, and the broker-dealer is acting in a principal (dealer) capacity.Cevap
  2. B
    The bank qualifies as a Qualified Institutional Buyer (QIB) based on its total assets exceeding $100 million, and the broker-dealer is acting in an agency (broker) capacity.
  3. C
    The bank qualifies as a Qualified Institutional Buyer (QIB) based on its client asset portfolio, while the broker-dealer acts as an agent (broker) charging a disclosed commission.
  4. D
    The bank does not qualify as a Qualified Institutional Buyer (QIB), and trade clearance and automated trade netting for the purchase are performed directly by the Depository Trust Company (DTC).

Cevap

The bank does not qualify as a Qualified Institutional Buyer (QIB) because it owns/invests less than $100 million in eligible securities, and the broker-dealer is acting in a principal (dealer) capacity.
Under Rule 144A, a Qualified Institutional Buyer (QIB) must own and invest at least 100millioninsecuritiesofnon−affiliatedissuersonadiscretionarybasis.Becausethebankonlymanages100 million in securities of non-affiliated issuers on a discretionary basis. Because the bank only manages 85 million in securities portfolios, it fails the QIB criteria regardless of its total assets. Furthermore, when a registered broker-dealer executes a transaction directly from its proprietary inventory, it acts as a principal (dealer) and charges a markup rather than acting as an agent (broker).

Adım Adım Çözüm

1
Evaluate the institution's eligibility under Rule 144A.
The bank holds 85millionindiscretionarysecuritiesportfolios,whichfallsshortofthestatutory85 million in discretionary securities portfolios, which falls short of the statutory 100 million threshold required for Qualified Institutional Buyer (QIB) status under Rule 144A. Total assets ($150M) cannot satisfy the specific securities ownership test for non-bank QIB evaluations.
Rule 144A requires institutions to own/invest at least $100 million in securities of non-affiliated issuers to participate in private placement liquidity pools.
2
Determine the operational capacity of the broker-dealer.
The broker-dealer filled the client order directly out of its own inventory.
When a broker-dealer trades for its own account out of inventory, it acts as a dealer (principal) earning a markup/markdown, whereas acting as a broker (agent) involves matching third-party buyers and sellers for a commission.

Anahtar Kavram

QIB Thresholds and Broker-Dealer Capacities
Tahmini Süre:2m 0s
Bu soruyu puanla

Konular

Market Participants and Investor Classifications

Bu konudan daha fazla soru